Everything Is Changing So Fast

On the heels of some wild trading in global markets, everything is changing so fast.

Everything Is Changing So FastJune 26 (King World News) – From Louis-Vincent Gave of Gavekal: The demography of most Western and Asian countries is set to change dramatically over the coming years. Take the US as an example. Every year from now on, some 3 million people will turn 70 years old. And while Charles would argue that 70 is the new 40, the reality is that at around that age, the direct contribution of most people to society shifts. From their 30s to their 60s, people are capital providers. Past 70, they become heavy capital consumers.

As the chart above illustrates, most people:

are net consumers between the ages of 0 and 34 years old;

are net savers between the ages of 35 and 64 years old;

are net consumers again past 65 years old;

and when they pass 70 years old, their consumption of capital really goes into over-drive.

So, if we accept that in most countries most of the saving is done by people aged 35-64 years, we can come up with a “capital providers ratio”. This is a weighted coefficient of the numbers of people in the savers’ cohorts relative to the total population. For the world (or at least for the top 85 countries by GDP, which account for almost all global saving), the capital providers ratio looks something like this.

From the 1960s to the early 1980s, as the world went through the tail-end of the baby boom and the first boomers went to college and then joined the work force, there weren’t enough savings to go around. The global capital providers ratio kept on deteriorating (the ratio on the chart above is inverted). The competition for goods and services was fierce, and the world experienced a parallel rise in inflation and rise in the cost of capital.

By the early 1980s, however, the global capital providers ratio started to improve as the baby boomers hit their mid-30s in ever greater numbers. Contributions into pensions funds, 401(k) and savings accounts duly shot up. In the following years, the world as a whole “over-saved” and “under-consumed”. Inflation duly collapsed, along with interest rates.

Unfortunately, the world is now entering a new “dis-saving” phase, as the baby boomers start to live off their past contributions into 401(k), pension plans and the like. History suggests this phase is likely to be inflationary.

GoldREAD THIS NEXT! Gold Pulls Back, But What Is Happening Now Is Unbelievable CLICK HERE TO READ